Gold Drops for First Day in Three on Share Slump, Oil Decline

By Glenys Sim

Sept. 23 (Bloomberg) -- Gold fell for the first day in three after advancing above $900 an ounce as investors sold the metal to cover losses in equities markets and as crude oil declined, reducing demand for commodities as an inflation hedge.

Gold traded 14 percent below its record $1,032.70 an ounce reached March 17 and 21 percent above its 11-month low of $736.70 on Sept. 11.

``What happens in the currency, oil and stock markets will continue to determine the way gold trades,'' Ronald Leung, director, Lee Cheong Gold Dealers (Hong Kong) Ltd., said by phone from Hong Kong. ``It's a confidence issue and no one knows what will happen next. The only certain thing now is that the volatility we've seen in the past few weeks will continue.''

Bullion for immediate delivery dropped as much as 1.2 percent to $886.00 an ounce and traded at $889.38 an ounce at 3:30 p.m. in Singapore. The metal climbed to $909.64 earlier. Silver for immediate delivery was down 0.9 percent at $13.33 an ounce.

Asian stocks fell, snapping a two-day rally, after commodity prices jumped yesterday by the most since at least 1956 and concern grew the U.S. financial-industry bailout won't prevent a recession. Oil fell for the first time in a week.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke submitted a plan to Congress Sept. 20 to end the worst credit market crisis since the Great Depression. The rescue was conceived after New York-based Lehman Brothers Holdings Inc. filed for bankruptcy, the government seized control of American International Group Inc., and Merrill Lynch & Co. was forced into the arms of Bank of America Corp.

Safe Haven

The Reuters/Jefferies CRB Index of 19 raw materials jumped 3.9 percent yesterday on speculation resources will provide a safe haven as the U.S. bank rescue plan inflates the budget deficit.

Investors are waiting for Congress to approve the $700 billion plan to buy bad mortgage assets, and ``if the plan succeeds in calming the market, we may see people pull out of gold and put money back into the stock market,'' Leung said.

Gold held in London-listed exchange-traded funds managed by ETF Securities Ltd. dropped 1.9 percent to 1.536 million ounces as of Sept. 19, data posted on company's Web site showed. The company held a record 1.898 million ounces in its funds as recently as Sept. 3.

Gold for December delivery lost 1.6 percent to $894.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange, after gaining to $915.20.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net